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Habit Formation, Information Exchange and the Social Geography of Demand

Author

Listed:
  • Babutsidze, Zakaria

    (UNU-MERIT)

  • Cowan, Robin

    (UNU-MERIT, Maastricht University, BETA, University of Strasbourg)

Abstract

This paper is concerned with clustering in demand. We present a discrete choice model of consumption that incorporates habit formation and information exchange among consumers in fixed social networks. We provide an analytical solution to a special case of the model by using technical tools from chemistry and biology. We demonstrate the validity of these results for the general case numerically. It is shown that clustering in demand is a solution to the complex system we are analyzing, and that clustering pattern can be short-term or long-lasting depending on the characteristics of the society.

Suggested Citation

  • Babutsidze, Zakaria & Cowan, Robin, 2008. "Habit Formation, Information Exchange and the Social Geography of Demand," MERIT Working Papers 2008-047, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  • Handle: RePEc:unm:unumer:2008047
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    File URL: https://www.merit.unu.edu/publications/wppdf/2008/wp2008-047.pdf
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    Cited by:

    1. Zakaria Babutsidze, 2009. "Learning How to Consume and Returns to Product Promotion," Papers on Economics and Evolution 2009-05, Philipps University Marburg, Department of Geography.
    2. Don J. Webber & Michael Horswell, 2009. "Microeconomic foundations of geographical variations in labour productivity," Working Papers 0913, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.

    More about this item

    Keywords

    demand; clustering; information; partial differential equations;
    All these keywords.

    JEL classification:

    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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